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Fitch Ratings Retains PH Credit Rating

by: Sarah Joson

Monday, April 11, 2016 |

Credit rating agency Fitch Ratings said last Friday it will be keeping its minimum investment grade rating to the Philippines. The debt watcher kept the rating of “BBB-“ for the country’s long-term foreign-currency issuer default ratings (IDR), and “BBB” for the long-term local-currency IDR.

The decision to keep the rating was based on the Philippines’ solid macroeconomic footing. However, Fitch cited the continuity of reforms after the national elections as a risk to the country’s outlook.

The agency’s “positive” outlook for the economy was also kept as the country’s external finances are considered as a “rating strength”. Other factors are the narrowing fiscal deficit, lower levels of public debt, steady remittance inflows, as well as a sustained current account surplus over 10 years ago.

Government debt has since declined from 43% of gross domestic product in 2010 to 36% during the latter part of 2015. Another development is the country’s budget gap which dropped from 3.5% recorded five years ago to 0.9% last year. Fitch said fiscal deficit will stay below the 2% ceiling set by the country’s economic experts for the coming years.

Financial institutions in the Philippines were also said to have a positive outlook since the segment has a healthy liquidity and strong capital safety nets as the country implemented the specifications set by the Bangko Sentral ng Pilipinas (BSP) to control the operational risks within the banking sector.

The country’s growth momentum is expected to continue until 2017 as the outlook continues to be on the “favorable” side on the heels of an average expansion of 5.9% over the last five years.

Fitch also pointed out in a statement that the average real GDP growth from 2011-2015 was 5.9% which is far above the 3.3% average within the ‘BBB’ rating, and the 3.2% median rating in the ‘A’ segment. The debt watcher predicts growth momentum to continue and foresees real GDP growth to average around 6% throughout 2016-2017.

Meanwhile, the government has pegged a 6.8-7.8% growth target for this year, which is marginally lower than the initial 7-8% goal due to the “very challenging” external environment. If these targets are achieved, growth will gain traction from the slower-than-targeted 5.8% posted in 2015.


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